Acct 2230 Final Exam

Front 1

Chapter 3:

Process vs Job Order Costing

Back 1

Process Costing: produces many units of a single product

products are indistinguishable from each other

Job Order Costing: many different products are produced each period

Front 2

Chapter 3:

Predetermined Overhead Rate (POHR)=

Back 2

Estimated total Manufact Overhead Costs

Estimated total units in the allocation base

Front 3

Chapter 3:

Overhead Applied=

Back 3

POHR x Actual Activity

Front 4

Chapter 3:

Process of Job Order Costing System

Back 4

1) Sales Order

2) Production Order

Front 5

Chapter 3:

Applied Overhead=

Back 5

POHR x Actual Direct Labour Hours

Overapplied means Applied overhead > actual (Net Income higher)

Underapplied means Applied overhead < actual (Net Income Lower)

Front 6

Chapter 5:

ABC is designed...

Back 6

to provide managers with cost information

Front 7

Chapter 5:

ABC is different from traditional in four ways...

Back 7

1) assigns both types of costs to products

2) does not assign all manufacturing costs to products

3) uses more cost pools

4) bases level of activity on capacity

Front 8

Chapter 5:

ABC has 5 different activity levels...

Back 8

1) Unit-Level

2) Batch-Level

3) Product-Level

4) Customer- Level

5) Organization- Level

Front 9

Chapter 6:

Vairable Costs for

1) Merchandising

2) Manufacturing

3) Merchandising & Manufacturing

4) Service

Back 9

1) COGS

2) Direct Mat, Direct Lab, Variable Overhead

3) Commisions, shipping, clerical

4) Supplies, travel , and clerica

Front 10

Chapter 6:

Step-Variable Cost:

Back 10

Resource only obtainable in large chunks and whose costs increase or decrease only in response to fairly wide changes in activity

Front 11

Chapter 6:

The linearity assumption and the relevant range:

Back 11

a straight line closely approximates a curvilinear variable cost line within the relevant range.

Front 12

Chapter 6:

Types of fixed costs

Back 12

1) Committed

2) Discretionary

Front 13

Chapter 7:

5 interrelationships among cost, volume, and profit

Back 13

1. prices of products

2. volume

3. per unit V.C

4. fixed costs

5. mix of products sold

Front 14

Chapter 7:

Contribution margin is...

Back 14

the amount remaining from sales revenue after variable expenses have been deducted

Front 15

Chapter 7:

Contribution Ratio=

Back 15

Total Contribution Margin/Total Sales

OR

Unit CM/ Unit Selling Price

Front 16

Chapter 7:

Net Operating Income=

Back 16

units of sales above or below break even * Contribution Margin/Unit

Front 17

Chapter 7:

Break Even Point Methods:

Back 17

1) Equation Method

Profit= (Sales- VC)-FC

Sales= V.C + F.C + Profits --> Profits =0

2) C.M Method

B.E.P in units= FC +Target Profit / CM/unit

B.E.P in dollars= FC + Target Profit/CM Ratio

Front 18

Chapter 7:

Margin of Safety=

Back 18

Total Sales - Break-even sales

OR

Extra Sales/Total Sales

Front 19

Chapter 7:

Cost structure refers to....

Back 19

the relative proportion of fixed and variable costs in an organization

Front 20

Chapter 7:

Advantage of high fixed costs...

Disadvantage of high fixed costs...

Low fixed costs...

Back 20

income will be higher in good years

income will be lower in bad years

provide stability

Front 21

Chapter 7:

Degree of Operating leverage=

Back 21

CM/Net Operating Income

Front 22

Chapter 7:

% increase in profits=

Back 22

% increase in sales x degree of operating leverage

Front 23

Chapter 7:

Steps to indifference between two alternatives:

Back 23

1) Determine the unit CM x # of units + T.F.C of each alternative

2) Setup equation for each and set equal

3) Solve for Q, the indifference point

Front 24

Chapter 8:

Absorption Costing- product costs, period costs

Variable Costing- product costs, period costs

Back 24

1) Product Costs= Direct Mat, Direct Lab, Variable and Fixed M.O

Period Cost= Variable and Fixed Selling and Admin

2) Product Costs= Direct Mat, Direct Lab, Variable M.O

Period Costs= Fixed M.O, Variable and Fixed Selling and Admin

Front 25

Chapter 8:

Production > Sales

Production < Sales

Production = Sales

Back 25

1) Inventory increases, Absorption > Variable Income

2) Inventory decreases, Absorption < Variable Income

3) No Change in inventory, Absorption = Variable

Front 26

Chapter 10:

Standards are...

Back 26

benchmarks or "norms" for measuring performance.

Quantity standards specify how much of an input should be used

Cost Standards specify how much should be paid for each unit of input

Front 27

Chapter 10:

Variance Analysis Cycle

(6 steps)

Back 27

Identify Questions

Receive Explanations

Take Corrective Actions

Conduct next period's operations

Prepare Standard Cost performance report

Analyse Variances

Front 28

Chapter 10:

Budget vs Standard

Back 28

Budget is set for total costs

Standard is per unit cost

Front 29

Chapter 10:

Material Price Variance=

Material Quantity Variance=

Back 29

(AQ x AP) - (AQ x SP)

(AQ x SP) - (SQ x SP)

Front 30

Chapter 10:

Labour Rate Variance=

Labour Efficiency Variance=

Back 30

AH(AR - SR) (Two A's, H outside, R inside)

SR (AH - SH) (Two S's, R outside, H inside)

Front 31

Chapter 10:

Variable Manufacturing Overhead Spending Variance (VMSV)=

VMEV=

Back 31

AH (AR- SR)

SR (AH-SH)

Front 32

Chapter 10:

Assigned Overhead=

Back 32

POHR x Standard Activity

POHR= Overhead from flexible budget for the denominator level of activity/ Denominator level of actvity

Front 33

Chapter 10:

Normal Cost vs Standard Cost

Back 33

Normal cost, overhead is applied to W-I-P based on actual # of hours worked

Standard cost, overhead if applied to W-I-P based on the standard hours allowed for the actual output

Front 34

Chapter 10:

Budget Variance=

Volume Variance=

Back 34

Actual Fixed Overhead - Fixed Overhead Budget (DH x FR)

Fixed overhead budget - Fixed Overhead Applied

(DH x FR) - (DH x FR)

Front 35

Chapter 10:

Theoretical Capacity x Practical Capacity

Back 35

Theoretical capacity is the volume of capacity if all available production time is used and no waste occurs.

Practical capacity represents what could be produced with operations at theoretical capacity less unavoidable downtime.

Front 36

Chapter 11:

Benefits of Decentralizaton

Back 36

- Lower level managers gain experience

- Top mgmt freed to concentrate strategy

- Lower level decisions often based on better info

Front 37

Chapter 11:

Disadvantages of Decentralization

Back 37

- Lower level managers may make decisions without the "big picture"

- lower level managers objections may not be those of the oranization

Front 38

Chapter 11:

A segment...

Back 38

any part of activity of an organization about which managers seeks cost, revenue, or profit data

Front 39

Chapter 11:

Keys to building segmented income statement

Back 39

A contribution format should be used

Traceable fixed costs should be seperated from common F.C

Front 40

Chapter 11:

Segment margin=

Back 40

Segment C.M- Tracable F.V

Front 41

Chapter 11:

Cost Centre:

Back 41

A segment whose manager has control over costs, but not over revenues or investment funds.

Front 42

Chapter 11:

Profit Centre:

Back 42

A segment whose manager has control over both costs and revenues but no control over investment funds

Front 43

Chapter 11:

Investment Centre:

Back 43

A segment whose manager has control over costs, revenues, and investments in operating assets

Front 44

Chapter 11:

Transfer price:

Three primary approaches to setting transfer price

Back 44

is the price charged when one segment of a company provides goods or services to another segment of the company

1. Negotiated transfer prices

2. Transfers at the cost to the selling division

3. Transfers at market price

Front 45

Chapter 11:

ROI=

Margin=

Turnover

Back 45

Operating Income / Average Operating Assets OR

Margin x Turnover

Operating Income/Sales

Sales/ Avg Operating Assets

Front 46

Chapter 11:

Residual Income=

Back 46

Operating Income - (avg operating assets x min required ROR)

Front 47

Chapter 11:

Balanced Scorecard

Back 47

Financial

Customers

Internal Business Processes

Learning and Growth

Front 48

Chapter 11:

Throughput=

Manufacturing Cycle Efficiency=

Delivery Cycle time=

Back 48

Process+Inspection + Move + Queue

Process / Throughput

Throughput + Wait

Front 49

Chapter 11:

Quality Costs

(4)

Back 49

1. Prevention Costs

2. Appraisal Costs

3. Internal Failure Costs

4. External Failure Costs

Front 50

Chapter 11:

To be ISO 9000 certified

Back 50

1. A quality control system is in use

2. system is fully operational and is backed up

3. intended level of quality is being achieved

Front 51

Chapter 12:

Relevant Cost

Back 51

is a cost that differs between alternatives

Front 52

Chapter 12:

Avoidable Cost:

Back 52

a cost that can be eliminated, in whole or in part, by choosing one alternative over another

Front 53

Chapter 12:

Special Order:

Back 53

one-time order that is not considered part of the company's normal ongoing business

Front 54

Chapter 12:

Constraint

Back 54

when a limited resource of some type restricts the company's ability to satisfy demand

Front 55

Chapter 12:

Bottleneck:

Back 55

the machine or process that is limiting overall output (it is the constraint)

Front 56

Chapter 12:

Theory of Constraints

Back 56

maintains that effectively managing a constraint is important to the financial success of an organization

Front 57

Chapter 13:

Captial budgeting into two categories...

Back 57

1) Screening decisions (meeting standard (sevs)

2) Preference Decisions (choosing amoung several)

Front 58

Chapter 13:

Determine NPV in 3 steps

Back 58

1) calculate PV of cash flows

2) calculate PV of cash outflows

3) Subtract the PV of the outflows from inflows

Front 59

Chapter 13:

Typical Cash Outflows

Back 59

-Repairs and maintenance

- working capital

- inital investment

- incremental operating costs

Front 60

Chapter 13:

Typical Cash Inflows

Back 60

-Salvage value

- release of working capital

- reduction of costs

- incremental revenues

Front 61

Chapter 13:

Profitability Index=

Back 61

Present Value of Net Cash Inflows/ Investment Required

Front 62

Chapter 13:

Payback period=

Back 62

Investment Required/Net annual cash inflow

Front 63

Chapter 13:

Simple Rate of Return=

Back 63

Incremental Revenues- Incremental expenses including depreciation/ initial investment